Wal-Mart: A 'Reputation Crisis'

The giant retailer has been trying hard to improve its image and reignite sales

by Pallavi Gogoi

The political advertisements include a number of actors talking sarcastically about Harold Ford Jr., the Democratic candidate from Tennessee. The one who has stirred up all the controversy, though, is a bare-shouldered blonde who says she met Ford at a Playboy party and closes the clip by winking and whispering, "Harold, call me."

The ad is taking aim at an African American bidding to become the first black senator from Tennessee since Reconstruction, and it has set off a firestorm of debate, particularly among those who says it's a racist attempt to stoke fears of black men pursuing white women. Those who have taken heat for the ads include Ford's opponent, Bob Corker; the Republican National Committee, which paid for the ads; and Terry Nelson, the Republican strategist who created the ads.

One of the most surprising targets of criticism, however, has been Wal-Mart (WMT). The retailer didn't have any hand in the ads attacking Ford. However, Wal-Mart did have Nelson on its payroll as a consultant, as part of the company's growing effort to burnish its own image. Shortly after the Ford ads aired, Reverend Jesse Jackson came out attacking Wal-Mart and demanded that the company sever its relations with Nelson. Two days later, Nelson bowed to the pressure and submitted a letter ending his relationship to the company.

"A Real Threat"

It's been that kind of year for Wal-Mart. The Bentonville (Ark.)-based company has been pushing hard to improve its public image, at a time when its financial fortunes increasingly depend on it. It's come under heavy fire from workers and politicians, for everything from the low wages it pays workers to the small retailers it pushes out of business. That dark reputation has resulted in communities around the country taking on Wal-Mart, by trying to halt construction of new stores or forcing it to pay higher wages and benefits.

At the same time, the company is scraping for every dollar of sales it can get. On Oct. 30, Wal-Mart reported that estimated same-store sales for October rose a slim 0.5%, the smallest such increase in nearly six years (see BusinessWeek.com, 10/30/06, "Wal-Mart's 'Comps' Creep Lower"). Slow sales have resulted in Wal-Mart's stock going sideways for five years, a harsh situation for investors long accustomed to outsized returns.

Wal-Mart has a "reputation crisis," says Gerald Baron, founder and president of AudienceCentral, a public information emergency response group and author of Now Is Too Late 2: Survival in an Era of Instant News. "Wal-Mart understands that the situation they are in is a real threat to their future."

Image Incongruity

But Wal-Mart's efforts to improve its public image have been floundering. Besides the company ending its relationship with Nelson, it's had to backtrack on several fronts. In August, Andrew Young, the first African American U.S. ambassador to the U.N., resigned his position as head of the company-backed group Working Families for Wal-Mart, after making anti-Semitic and anti-Korean comments. Then, in October, a folksy blog called "Wal-Marting Across America" drew fire. The blog focused on happy Wal-Mart workers, but the couple writing it hadn't disclosed that the expenses and the writing were paid for with Wal-Mart money. That same month, independent filmmaker Ron Galloway, who had made movies in support of the company, reversed course and resigned from the board of Working Families for Wal-Mart.

The contrast between how critics see Wal-Mart and how the company sees itself couldn't be more stark. While opponents say the retailer hurts workers by paying them low wages and benefits, Wal-Mart execs see themselves as champions of the middle class, making products affordable by pushing suppliers to offer goods at lower prices.